Tom Evslin: Oil companies profit because we shut off Russian competition

This commentary is by Tom Evslin of Stowe, an entrepreneur, author and former Douglas administration official. It is republished from the Fractals of Change blog.

The Wall Street Journal has a story about President Joe Biden’s feeble attempt to increase U.S. oil production by promising to refill the strategic reserve at a low price. Up until now he has discouraged drilling and promised to end the use of fossil fuels. He’s complained about oil company profits; but what’s he’s actually done is made it easier for them to profit greatly by restricting new supply in the absence of Russian competition.

Tom Evslin

According to the WSJ: “Energy executives and analysts expressed doubts the plan would spur a large increase in production in the short term. … They hope to capture high oil prices while they are in place. Rising drilling costs and pressure from investors to limit production and return excess cash to shareholders are also dimming the outlook for production growth.”

Time for the oil companies and the president to get off the dime. More U.S. oil needs to flow immediately — both to keep driving, trucking, and heating costs down domestically and to preserve Europe’s ability and will to forgo Russian oil. This is cold war 2.0 (let’s hope it stays cold for us) and profiteering is not acceptable, especially from companies which are being protected from competition. Three steps’ll do it:

  1. An immediate huge sale of oil and gas leases on federal land, but only to those who will both drill immediately on the new leaseholds and increase production from their current holdings. This is an offer that the oil company investors won’t be able to say no to because they run the risk that their competitors will get the leases.
  2. Expedited permitting — really expedited — but, again, only for those who will increase production now on existing and newly permitted locations. If some permitting is being expedited, some will get delayed. Those who don’t want to increase production can wait.
  3. A windfall profits tax. I’m a free-market fiscal conservative. However, since we’re protecting these companies from Russian, Iranian, and Venezuelan competition, they are not operating in a free market. They are benefitting from the embargos. Because our goal is increased production, companies should be able to escape the excess profits tax by plowing those profits back into immediately increased drilling.

The first two steps can and should be taken by executive order. The president, who has been very strong in his support of Ukraine, needs to defy the extreme left of his party and get the oil flowing that’ll let us and our allies deny Putin his energy weapon. The third step takes Congressional action which should happen in the lame duck session after the election. Some on the right will object to the windfall profits tax. Some in the middle will try to protect the oil companies. The left won’t want an exception for more drilling. Nevertheless, when Americans get their oil bills this winter, there’ll be plenty of public support for making sure oil companies don’t get to profiteer during a war by sitting on their assets.

Image courtesy of Public domain

4 thoughts on “Tom Evslin: Oil companies profit because we shut off Russian competition

  1. I’m not sure if the oil companies are rolling in the cash, but the federal government
    must be, as ” feckless Joe ” is handing out billions like it ” trick or treat ” candy, and
    it mostly goes to everyone but its citizens, especially our Veterans, pretty pathetic.

    Keep working, and keep voting for these liberal fools, and they’ll keep playing the
    blame game, and waste your tax dollars. its always everyone else causing all the
    problems, except liberal democRATs…………………

  2. EU bureaucrats ordained no more long term contracts with Russia for low-cost natural gas, because they wanted to LOOK green

    Russia responded, it would deliver gas only to clients with long term contracts

    Then, the Ukraine situation happened and illegal sanctions made worthless the euro and dollar to Russia.

    Russia was not going to deliver gas for free

    Russia required the gas be paid for in rubles
    Almost all buyers of gas eventually complied

    The hold-outs that did not comply, saw their gas cut, because Russia was not going to deliver gas for free to them.

    Then, the 15 year old compressors of Nordstream1 needed overhauls, according to Siemens, in Germany.

    Siemens shipped some of the compressors to Canada, which refused to return them, “ because of sanctions”

    Then, the gas flow through Nordstream1 was reduced
    Nordstream 2 was never started.

    Then, Nordstream 1 and 2 were blown up by the U.S./UK, to make sure Germany would not make a gas deal with Russia.

    Then, Mercedes, after it saw all hope was lost, announced it would quit the very lucrative Russian market

    • too funny, Willem….you gave a smack down. Ya’ mean it was NOT all Russia’s fault:)…. They contributed, yes…but not sole cause. Dems and LawFare Enviro’s are out to destroy American energy…in the name of Climate Change. Biden and Enviros shut down pipelines, halt federal leases, they make rules and regulations so onerous you can’t get a permit to drill….they make regulations for REFINERIES so onerous they are hard to operate at a profit. Refineries are closing because the regulatory costs make then unprofitable (the plan all along?)….No new large refinery has been built in the last 45 years. Chevron CEO stated he doubts there will EVER be another large one built…billions $ of costs…and 5-10 years of contruction and heavy regulations and oversight – that change at every turn.. EVEN IF WE PRODUCD MORE OIL (as Mr. Evslin wants)….the USA doesn’t have the REFINERY CAPACITY to handle it……Biden and enviros kill any new pipeline to transport…along with VT’s own CLF shuttig down New England access… Next they want to shut down fracking. So what is left as a viable business? Not much.. SO MR.EVSLIN says WINDFALL PROFITS tax them NOW, just as they get back on their feet with big profits?. The MORE YOU TAX SOMETHING – THE LESS YOU WILL GET OF IT…..Oil firms will cut BACK ANY new drilling b/c of the tax will TAKE SO MUCH OF IT! NO incentive….. Vermonters elect these enviro Dems…so I have …ZERO… sympathy for them when they see their “fossil fuel” heating bills soon…or cost of gas for their car.

  3. You sound just like another “feel good” that you support a windfall profits tax on oil companies. Stupid idea. Why?. For well over a decade oil companies MADE NO REAL PROFITS. They have YEARS of losses and massive debt taken on to pay back to SURVIVE. Oil went to NEGATIVE $40 a barrel in 2020. They nee higher prices to to pay for years of losses. If you want REAL windfall profits, look at the biggest DEMOCRAT PROTECTED TECH companies. APPLE alone made $100 billion last year. The top 15 made $650 BILLION last year, and have done similar for TWENTY YEARS. So before you “feel good” & spout “windfall profits” on oil….you better look at facts of what the largest oil companies reported last handful of years. If you put a windfall profit on oil in USA…they WILL JUST DRILL & PRODUCE LESS :)…which is EXACT OPPOSITE OF WHAT YOU WANT!!!!!

    “A quick look at the actual financial data of major oil and gas companies tells the tale. Keep in mind that, over the long haul, overall net profit for all American companies averages a little over 5%. Here’s the oil and gas industry’s recent record:

    Year Net Profit Margins (% of revenue)
    2016 -53.6%
    2017 -12.6%
    2018 3.4%
    2019 -5.8%
    2020 -50.2%
    2021 8.7%
    Average: -18.4%
    Source: Ready Ratios, based on SEC data.”

    Not exactly “record profits,” is it.Mr.Evslin? WHY NOT WINDFALL PROFITS TAX on Apple, Google, Microsoft, Facebook etc? OOOPS! Can’t do that, they are ALL liberal democrat firms 🙂

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